EPA Proposes New Greenhouse Gas Emissions Standards for Fossil Fuel

May 12, 2023

On May 11, 2023, the U.S. Environmental Protection Agency ("EPA") announced proposed new greenhouse gas ("GHG") emissions standards for fossil fuel-fired electric generating units ("EGUs") (the "Proposed GHG Rule").1 The Proposed GHG Rule, which has not yet been published in the Federal Register, would, for the first time, require existing fossil fuel-fired EGUs to use carbon capture and sequestration ("CCS") to reduce emissions.

The Proposed GHG Rule is the EPA's third attempt to regulate GHG emissions from the power sector. The Proposed GHG Rule would replace the Trump Administration's Affordable Clean Energy or ACE Rule,2 which, in turn, replaced the Obama Administration's Clean Power Plan.3 Both the ACE Rule and Clean Power Plan were subject to multiple legal challenges and, as a result of court rulings, neither rule went fully into effect.

The Proposed GHG Rule, like the ACE Rule and Clean Power Plan, is predicated on Section 111(d) of the Clean Air Act, 42 U.S.C. Section 7411(d), which allows the EPA to require states to submit state implementation plan ("SIP") amendments that adopt standards of performance for stationary sources as to air pollutants for which air quality criteria have not been issued. Under Section 111(d) of the Clean Air Act, state SIP amendments must establish standards of performance that reflect the degree of emissions limitation achievable through the application of the "best system of emission reduction… adequately demonstrated" ("BSER"), taking into account the cost of achieving such reduction while also considering any non-air quality health and environmental impacts and energy requirements. The Proposed GHG Rule also would update the new source performance standards ("NSPS") for new stationary combustion turbine EGUs pursuant to Section 111(b) of the Clean Air Act, 42 U.S.C. Section 7411(b).

In the Clean Power Plan, EPA determined that BSER for GHG emissions for existing fossil fuel-fired EGUs was a combination of GHG emissions rate improvements and limitations on overall GHG emissions at affected EGUs accomplished through three sets of measures (or "building blocks"): (1) improving combustion efficiency (heat rate) at affected coal-fired steam EGUs; (2) substituting increased generation from natural gas-fired combined cycle EGUs for reduced generation from coal-fired steam EGUs; and (3) substituting increased generation from new zero-emitting renewable energy generating capacity for reduced generation from affected fossil fuel-fired EGUs. Building blocks 2 and 3 were particularly controversial, as they required implementing measures "outside-the-fenceline" of individual emission sources (by substituting electricity generation from those sources with electricity generation from lower-emitting facilities). Applying these measures, the EPA established specific GHG emissions rates reflecting BSER for fossil fuel-fired steam generating units and stationary combustion turbines of 1,305 pounds of carbon dioxide per megawatt-hour (lb CO2/MWh) and 771 lb CO2/MWh, respectively.

The ACE Rule eliminated the use of outside-the-fenceline control measures and specific numerical emissions rates, instead identifying as BSER GHG emissions reduction measures that could be applied to or at individual stationary sources. Similar to building block 1 of the Clean Power Plan, the ACE Rule identified "heat rate improvements," i.e., reducing the amount of CO2 emitted per unit of electricity generated (CO2 intensity) as BSER for GHG emissions for coal-fired EGUs. However, instead of applying a sector-wide percentage improvement as it did in developing the Clean Power Plan, in the ACE Rule, the EPA identified technologies and practices to improve heat rate, and then directed states in their SIP amendments to set a standard of performance (emissions rate) for each affected EGU by evaluating, among other factors, the specified technologies – which were neural network (computer model) control devices and intelligent sootblowers, boiler feed pumps, air heater and duct leakage control, variable frequency drives, redesign or replacement of economizer, and improved operating practices. The EPA specifically considered and rejected as BSER for GHG emissions for coal-fired EGUs CCS and alternative fuel (biomass or natural gas) co-firing.

Similar to the ACE Rule, the Proposed GHG Rule identifies as BSER for GHG emissions technologies that can be applied directly to fossil fuel-fired EGUs. However, reversing its prior determination, in the Proposed GHG Rule, the EPA identifies CCS and alternative fuel co-firing as BSER, with CCS and low-GHG co-firing identified as separate compliance "pathways." For some sources, the EPA also specifies target GHG emissions rates in pounds of CO2 per megawatt-hour as it did in the Clean Power Plan.

In general, the Proposed GHG Rule's standards are phased in over the period from 2030 to 2038. Highlights include the following.

Publication of the Proposed GHG Rule in the Federal Register will initiate a 60-day public comment period. The EPA also intends to schedule two virtual public hearings on the Proposed GHG Rule.

Promulgation of the Proposed GHG Rule in its current form, or, indeed, as shown by the ACE Rule and the Clean Power Plan, promulgation of any rule regulating GHG emissions from electricity generation will result in a new wave of legal challenges. The EPA's determination that CCS "is adequately demonstrated… and is highly cost-effective," will undoubtedly be controversial.

1New Source Performance Standards for Greenhouse Gas Emissions from New, Modified, and Reconstructed Fossil Fuel-Fired Electric Generating Units; Emission Guidelines for Greenhouse Gas Emissions from Existing Fossil Fuel-Fired Electric Generating Units; and Repeal of the Affordable Clean Energy Rule.

2Emission Guidelines for Greenhouse Gas Emissions from Existing Electric Utility Generating Units, 84 Fed. Reg. 32520 (July 8, 2019).

3Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 80 Fed. Reg. 64662 (Oct. 23, 2015).

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